SHRI RAKESH ARORA,DELHI vs. ITO WARD-30(8), DELHI

As per information being provided, during the course of enquiry proceedings, it is learned that Sh. Rajiv Mehan has maintained following bank accounts in different banks. The details of all the bank accounts alongwith details of total credit/debit turnover of these bank accounts during the F.Y. 2011-12 are as under- 2 Subsequently, Sh. Rajiv Mehan was asked to explain the source/nature of credit/debit entries appeared in the above mentioned bank accounts alongwith documentary evidence. Sh. Rajiv Mehan has neither provided the details of business activities carried out by him during the period 01.04.2011 10 31.03.2012 nor produced/submitted requisite documents/information/ books of accounts despite ample opportunities and thereby unable to explain the source/nature of transactions appeared in the above mentioned breik accounts. 3: Subsequently, summans u/s 131(A) of 11. Act, 1961 was also issued to Sh. Sunil Kumar, Prop. M/s Siful Knitwears and Sh. Parumjit Singli, Prop. Mis Pink Pearl Garments for furnishing of confirmed copy of account of M/s Shreyas International und M/s Sifat Knitwears respectively for the FY. 2011-12 alongwith other supporting documentary evidence. In response thereto, Sh. Paramjit Singh Prop Mis Pink Garments appeared and his statement recorded on oath w/s 131(14) of 1.T. Act, 1961. During the course of recording of his statement, he has stated that one Sunil Kumar Sharma Prop. M/s Sifat Knitwears got the bank account opened from him fraudulently and got blank cheques-signed an both sides. He further stated that he had not done any business with Sh. Sunil Kumar Sharina Prop. M/s Sifat Knitwears and no sale purchase have been made by him with M/s Sifat Knitwears. He had also stated that all the banking transactions made in bank account bearing no. 911020040341050 had been made by Sh. Sunil Kumar Sharma about which he do not have any knowledge. Sh. Sunil Kumar Sharina Prop. M/s Sifat Knitwears has neither appeared personally nor submitted any written reply despite ample opportunities. Perusal of hunk accounts of M/s Shreyas International. Mis Sifat Knitwears and Ms Pink Pearl Garments mentioned in the information available with the office of the undersigned, it is learned that funds has been firstly transferred from Mis Shreyas International to Mis Pink Pearl Garments on the same day. Further, on the same day, same amount of funds have been withdrawn in cash from the bank account of M/s Pink Pearl Garments. 5 It is hereby submitted that transactions made by Sh. Rajeev Mehan Prop Shreyas International during the F.Y. 2011-12 cannot be treated as genuine. Further, M/s Shreyas international has not produced its books of account for verification and other requisite documents as called for during the enquiry proceedings. In view of the facts mentioned above, it appears that M/s Sifat Knitwears and M/s Pink Pearl Garments are merely act an entry provider for M/s Shreyas international and M/s Shreyas international is acting as entry provider for other concerns. The details of which are as under :-

The CIT-Appeals, upon a review of the documentary evidence on the record, which included supporting bank statements, the identities of the directors of the two companies, the tax returns filed by those companies and the confirmation of loans given by the Respondent concluded that the disallowance of the loan as being fake ought to be reversed. Page | 8

The ITAT too agreed with the CIT-Appeals. Distinguishing the case law cited by the Department, the ITAT agreed with the CIT-Appeals and held that the Respondent has discharged the onus of explaining the transactions. The ITAT has also examined another decision of the ITAT in respect of another assessee, which also had a valid loan from Javda India Impex Ltd. The ITAT agreed with the findings in that case to hold that the addition to the income had been raised merely on conjecture and surmise.

Having heard the Learned Counsels for the parties and having reviewed the record, we do not find this to be a fit case for an appeal, that raises any substantial question of law-a prerequisite for this Appeal to be entertained. This is not a case of accounting entries masquerading as purchase of goods or services. The evidence on record, has led to the questions of fact being answered concurrently in two rounds of review, in favour of the Respondent. Therefore, no substantial question of law arises in the matter, and therefore, the Appeal is dismissed." 12.5 Accordingly, the addition made by the Assessing Officer u/s.69A of the Act ofRs.3,84,04,298/- is deleted.”

The brief facts are that the assessee was an employee with the Municipal Corporation of Delhi and, inter olio, had salary income. The assessee filed his Return of Income (Rol) for assessment year 2012-13 on 18.06.2012 declaring an income of Rs.2,07,380/-, which was processed under Section 143(1) of the Act. There was no regular assessment under Section 143(3) of the Act made in this case. It appears that the assessment was reopened by the Assessing Officer vide notice dated 28.03.2019 under Section 148 of the Act. The assessment was reopened presumably on account of Information received from the Investigation Wing about the assessee having received accommodation entries amounting to Rs.9,60,000/- in financial year relevant to assessment year 2012-13. The Assessing Officer found that the assessee had claimed exemption under Section 10(38) of the Act on the Long Term Capital Gains (LTCG). It was found that the assessee was one of the beneficiaries of the accommodation entries received through an entry operator who was involved in the manipulation of prices of various scrips. The Assessing Officer found that the assessee had concealed the particulars of income. The Assessing Officer completed the assessment on 25.11.2019 and made the following additions: i) Rs.9,60,000/- under Section 68 of the Act on account of bogus LTCG; ii) Rs.15,48,000/- (Rs.1,48,000/- cash deposit and Rs.14,00,000/- received by cheque) as unexplained cash credit under Section 68 of the Act; and, iii) Rs.20,62,375/-under Section 69 of the Act being unexplained expenditure as assessee was found to have purchased property for the said sum.

The learned Vice President (Judicial Member) placing reliance on the decision of Bombay High Court in CIT vs Jet Airways (1) Ltd., 331 ITR 236 (Bom) and jurisdictional Delhi High Court decision in ATS Infrastructure Ltd. vs ACIT, 473 ITR 595 (Delhi) has found that once the addition made on account of original reasons recorded (in this case, the addition on account of alleged bogus LTCG is deleted, the other two additions, which were not part of original reasons recorded, cannot be sustained. The learned Accountant Member, by his dissenting order, has found that the decision in Jet Airways (1) Ltd. (supra) and ATS Infrastructure Ltd. (supra) are distinguishable on facts and cannot be called into aid to delete the balance additions.

In Jet Airways (1) Ltd. (supra), following was the substantial question of law posed before the Bombay High Court :- "Where upon the issuance of a notice under section 148 of the Income-tax Act, 1961 read with section 147, the Assessing Officer does not assess or, as the case may be reassess the income which he has reason to believe had escaped assessment and which formed the basis of a notice under section 148, is it open to the Assessing Page | 13 Officer to assess or reassess independently any other income, which does not form the subject-matter of the notice?"

The Bombay High Court in the context of Explanation 3 to Section 147 of the Act added by the Finance (No. 2) Act, 2009 held as under :- "Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance or core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, ofresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee."

Thus, the distinction sought to be made out by the learned Accountant Member, in my considered opinion, cannot be accepted, 14. The learned Accountant Member in para 3.4 of his order has found that the case of B.P. Poddar Foundation for Education (supra) decided by the Kolkata Bench involves identical facts. Incidentally, the decision in the said case has been confirmed by the Calcutta High Court. This aspect has been considered by the learned Accountant Member in para 5 onwards of his order. Before the Calcutta High Court, the Revenue had raised the following substantial question of law :- (i) Whether on the facts and circumstances as well as in law the Income-tax Appellate Tribunal was correct in law in holding that the other additions made in the Page | 14 order under section 147/143(3) of the Income-tax act, 1961, which were not part of the reasons recorded for reopening the assessment were not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009 when addition was made by the Assessing Officer on the ground of reopening? (ii) Whether on the facts and circumstances of the case the Learned Income-tax Appellate Tribunal correctly interpret the decision reported in the case of Jet Airways (1) Limited reported 331 ITR 236 (Bom) and Ranbaxy Laboratories Ltd. reported in 336 ITR 136 (Del) on facts in the instant case?"

The Calcutta High Court, inter alia, relying upon the decision of Bombay High Court in the case of Jet Airways (1) Ltd. (supra) and that of Delhi High Court in Ranbaxy Laboratories Ltd. (supra) had found that the Tribunal was justified in finding that the reopening was bad in law. However, here again, the learned Accountant Member in para 5.8 of the order has found that the reliance placed by the Kolkata Tribunal on the decision of Bombay High Court in Jet Airways (1) Ltd. (supro) and the Delhi High Court in Ranbaxy Laboratories Ltd. (supro) "is not acceptable" because no such proposition was laid down in these decisions. The following observations in para 5.8 of his order are relevant :- "5.8 However, as discussed above, in the present case, the AG had made addition in respect of the issue on which the assessment was reopened and also in respect of two other issues which come to his notice during the assessment proceedings on the basis of materials available on record. In the present case, it is not the case that the AO did not make the addition on the issue on which the assessment was reopened u/s 148 of the Act but the said addition was deleted by the Ld. CIT(A). Therefore, the reliance placed by the Kolkata Tribunal on the decisions of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (1) Ltd. (supra) and of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT (supra) to hold that if the addition on the basis of which the reassessment was made was deleted in appeal, then the AO could not make addition in respect of other issues which come to his notice during the reassessment proceedings, unless Page | 15 the AO has issued a separate notice u/s 148 of the Act to assess each of the said new issue coming to the notice of the AO during the reassessment proceedings is not acceptable because no such proposition was laid down in the decisions of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (1) Ltd. (supra) and of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT (supra)."

In my considered view, once the learned Accountant Member had found that the facts in the case of B.P. Poddar Foundation for Education (supra) were identical, it was not open to express any contrary view. That being an order of the co-ordinate Bench was binding.

The learned Accountant Member has also reproduced in para 3.2 of the order the observations of learned CIT(A) while deleting the addition in respect to bogus LTCG. The learned Accountant Member found that the findings are "a little abrupt". Although the reasons given by the learned CIT(A) could have been more specific and clear, the said aspect cannot be gone into for the reason that ultimately the learned CIT(A) has partly allowed the appeal and deleted the addition and that order has not been challenged by the Revenue and has thus attained finality.

In the result, Ground no. 3 as raised by the assessee deserves to be allowed and the impugned addition cannot be sustained. The question as referred to is answered accordingly, holding that the reopening u/s 147 r.w.s 148 of the Act, in this case, is not valid. The appeal, therefore, deserves to be allowed as proposed by the learned Vice President (Judicial Member). PER MAHAVIR SINGH, VP: This appeal was fixed for giving effect to the order of the Ld. Third Member in which the Ld. Third Member concurred with the view of Ld. Vice President (Judicial Member) with regard to the following question framed :- "Whether, in the given facts and circumstances of the case, the reopening under Section 147 read with Section 148 of the Act is valid or not where the Assessing Page | 16 Officer made addition independently of other income which does not form the subject matter of reopening and where addition made by the Assessing Officer on the basis of reasons recorded for reopening were deleted by the CIT(A) and no addition of that income on the basis of reasons recorded survives which has reason to believe had escaped assessment and which formed the basis of reopening."

Since, the Ld. Third Member concurred with the view of Ld. Vice President (Judicial Member) by holding that reopening u/s. 147 r.w.s. 148 of the Act, in this case, is not valid. Accordingly, consequent to the opinion of Ld. Third Member, appeal of the Assessee stands allowed.

Applying the ratio of the above decision of the Hon’ble Third Member to the facts of the assessee’s own case we hold that since the addition on the basis for reopening of assessment was deleted by the learned CIT(A), the reopening of assessment u/s.147 r.w.s. 148 is bad in law and accordingly we quash the reassessment order dated 31.12.2019 passed u/s. 143(3)/147 of the Act for A.Y. 2012-13. We allow the legal ground raised by the assessee and all other grounds on merits are left open.

In the result, the appeal of the assessee is partly allowed as indicated above.